King Pharmaceuticals Reports Second-Quarter 2008 Financial Results
BRISTOL, Tenn.--(BUSINESS WIRE)--Aug 7, 2008 - King Pharmaceuticals, Inc. (NYSE:KG) announced today that total revenues were $397 million during the second quarter ended June 30, 2008, compared to $543 million in the second quarter of 2007. This decrease was primarily due to the market entry of generic substitutes for ALTACE(R) (ramipril). Reported net earnings equaled $43 million and diluted earnings per share equaled $0.18 during the second quarter of 2008, compared to net earnings of $65 million and diluted earnings per share of $0.26 in the second quarter of the prior year. Excluding special items, net earnings equaled $73 million and diluted earnings per share equaled $0.30 during the second quarter ended June 30, 2008, reflecting a record high research and development investment of $49 million, which included development milestones of $21 million. Excluding special items, in the second quarter of 2007 net earnings equaled $117 million and diluted earnings per share equaled $0.48.
Brian A. Markison, Chairman, President and Chief Executive Officer of King, stated, "We are particularly pleased by the AVINZA(R) total prescription growth of 5.2% versus the same quarter of last year and the continued strong performance of THROMBIN-JMI(R)."
Mr. Markison continued, "More importantly, we remain on track to attain our goal of three New Drug Application (NDA) submissions to the U.S. Food and Drug Administration (FDA) by the end of this year. Once approved, these new products have the potential to provide significant value for patients, society and our shareholders."
King, through its partner, Pain Therapeutics, submitted a New Drug Application for REMOXY(R) (long-acting oral oxycodone) to the FDA in June. Also in June, King and Acura Pharmaceuticals reported positive top-line data from the pivotal Phase III clinical trial for ACUROX(TM) (short-acting oral oxycodone HCl, niacin, and other functional inactive ingredients). Based on these positive results, King and Acura plan to submit the NDA for ACUROX(TM) by the end of this year. King also expects to file an NDA for CORVUE(TM) (binodenoson, a pharmacologic stress imaging agent for injection) during that same period.
As of June 30, 2008, the Company's cash and cash equivalents totaled approximately $1.1 billion. During the second quarter of 2008, the Company generated cash flow from operations of approximately $138 million.
In addition, the fair value of King's total investments in debt securities equaled approximately $432 million as of the end of the second quarter of 2008. The Company has classified its investments in debt securities associated with municipal bonds as current assets as of June 30, 2008, because the Company believes that it is reasonable to expect that these securities will convert to cash within one year. The Company has classified its investments in debt securities associated with student loans, which as of June 30, 2008 had a fair value of $334 million, as long-term assets.
Net revenue from branded pharmaceuticals totaled $316 million for the second quarter of 2008, compared to $467 million during the second quarter of 2007.
Net sales of SKELAXIN(R) (metaxalone) totaled $107 million during the second quarter of 2008, compared to $108 million during the same period of the prior year.
THROMBIN-JMI(R) (thrombin, topical, bovine, USP) net sales totaled $64 million during the second quarter of 2008, compared to $65 million during the second quarter of 2007.
Net sales of AVINZA(R) (morphine sulfate extended release) totaled $35 million during each of the second quarters of 2008 and 2007.
LEVOXYL(R) (levothyroxine sodium tablets, USP) net sales totaled $20 million during the second quarter ended June 30, 2008, compared to $26 million during the second quarter of 2007.
ALTACE(R) net sales totaled $44 million during the second quarter of 2008, compared to $163 million during the second quarter of 2007.
King's Meridian Auto-Injector business contributed revenue of $55 million during the second quarter of 2008, compared to $51 million during the same period of the prior year.
Royalty revenues, derived primarily from ADENOSCAN(R) (adenosine), totaled $24 million during the second quarter ended June 30, 2008, compared to $20 million during the second quarter of last year.
About REMOXY(R)
REMOXY(R) is an innovative long-acting, controlled release formulation of oxycodone for moderate to severe chronic pain that is currently in development. REMOXY(R) uses extraction resistant technology (XRT(TM)), a unique physical barrier that is designed to provide controlled pain relief and resist common methods used to extract the opioid more rapidly than intended as seen with currently available products. Common methods used to cause a rapid extraction of the opioid include crushing, chewing, or dissolution in alcohol. These methods are typically used to cause failure of the controlled release dosage form, resulting in 'dose dumping' of oxycodone, or the immediate release of the active drug. If approved, the Companies believe REMOXY(R) could be the first oxycodone on the market that has the potential to reduce the risk of misuse and abuse. REMOXY(R) is a proposed brand name that is subject to FDA approval.
About ACUROX(TM) Tablets
ACUROX(TM) Tablets, an investigational drug, is an orally administered immediate-release tablet containing oxycodone HCl as an active analgesic ingredient, niacin as an active ingredient in subtherapeutic amounts, and a proprietary composition of functional inactive ingredients. ACUROX(TM) Tablets are intended to relieve moderate to severe pain while resisting or deterring common methods of prescription drug misuse and abuse, including intravenous injection of dissolved tablets, nasal snorting of crushed tablets and intentional swallowing of excessive numbers of tablets. ACUROX(TM) is a proposed brand name subject to FDA approval.
Webcast Information
King will conduct a webcast today which may include discussion of the Company's marketed products, pipeline, strategy for growth, financial results and expectations, and other matters relating to its business. Interested persons may listen to the webcast on Thursday, August 7, 2008, at 11:00 a.m., E.D.T., by clicking the following link to register and then joining the live event with the same URL:
http://www.kingpharm.com/web_casts.asp
If you are unable to participate during the live event, the webcast will be archived on King's web site at the same link for not less than 30 days after the webcast.
About Special Items
Under Generally Accepted Accounting Principles ("GAAP"), reported "net earnings" and "diluted earnings per share" include special items. In addition to the reported results determined in accordance with GAAP, King provides its net earnings and diluted earnings per share results for the quarters and six months ended June 30, 2008 and 2007, excluding special items. These non-GAAP financial measures exclude special items which are those particular material income or expense items that King considers to be unrelated to the Company's ongoing, underlying business, non-recurring, or not generally predictable. Such items include, but are not limited to, merger and restructuring expenses; non-capitalized expenses associated with acquisitions, such as in-process research and development charges and inventory valuation adjustment charges; charges resulting from the early extinguishment of debt; asset impairment charges; expenses of drug recalls; and gains and losses resulting from the divestiture of assets. King believes the identification of special items enhances the analysis of the Company's ongoing, underlying business and the analysis of the Company's financial results when comparing those results to that of a previous or subsequent like period. However, it should be noted that the determination of whether to classify an item as a special item involves judgments by King's management. A reconciliation of non-GAAP financial measures referenced herein and King's reported financial results determined in accordance with GAAP is provided below.
About King Pharmaceuticals, Inc.
King, headquartered in Bristol, Tennessee, is a vertically integrated branded pharmaceutical company. King, an S&P 500 Index company, seeks to capitalize on opportunities in the pharmaceutical industry through the development, including through in-licensing arrangements and acquisitions, of novel branded prescription pharmaceutical products and technologies that complement the Company's focus in specialty-driven markets, particularly neuroscience, hospital and acute care. King strives to be a leader and partner of choice in bringing innovative, clinically-differentiated medicines and technologies to market.
Forward-looking Statements
This release contains forward-looking statements which reflect management's current views of future events and operations, including, but not limited to, statements pertaining to the expected timetable for REMOXY(R), ACUROX(TM) Tablets and CORVUE(TM) NDA submissions with the FDA and the potential of these product to add value once approved; statements pertaining to the expectation that the Company's investments in debt securities associated with municipal bonds may convert to cash within one year; and statements pertaining to the Company's planned webcast to discuss its second-quarter 2008 results. These forward-looking statements involve certain significant risks and uncertainties, and actual results may differ materially from the forward-looking statements. Some important factors which may cause actual results to differ materially from the forward-looking statements include dependence on the future level of demand for and net sales of King's branded pharmaceutical products; dependence on King's ability to successfully market its branded pharmaceutical products; dependence on King's ability to increase its presence in its targeted, specialty-driven markets; dependence on the Company's ability to continue to advance the development of its pipeline products as planned; dependence on the high cost and uncertainty of research, clinical trials, and other development activities involving pharmaceutical products in which King has an interest; dependence on whether the NDAs for REMOXY(R), ACUROX(TM) Tablets and CORVUE(TM) are submitted to the FDA during the planned timeframe; dependence on the unpredictability of the duration and results of the FDA's review of Investigational New Drug applications ("IND"), NDAs, and Abbreviated New Drug Applications ("ANDA") and/or the review of other regulatory agencies worldwide that relate to projects in King's development pipeline; dependence on the extent to which continued instability in the credit markets affects King's ability to liquidate its investments in debt securities associated with municipal bonds; dependence on the availability and cost of raw materials; dependence on no material interruptions in supply by contract manufacturers of King's products; dependence on the potential effect on sales of the Company's existing branded pharmaceutical products as a result of the potential development and approval of a generic substitute for any such product or other new competitive products; dependence on the potential effect of future acquisitions and other transactions pursuant to the Company's growth strategy; dependence on King's compliance with FDA and other government regulations that relate to the Company's business; dependence on King's ability to conduct its webcast as currently planned on August 7, 2008; dependence on changes in general economic and business conditions; changes in current pricing levels; changes in federal and state laws and regulations; changes in competition; unexpected changes in technologies and technological advances; and manufacturing capacity constraints. Other important factors that may cause actual results to differ materially from the forward-looking statements are discussed in the "Risk Factors" section and other sections of King's Form 10-K for the year ended December 31, 2007 and Form 10-Q for the quarter ended March 31, 2008, which are on file with the U.S. Securities and Exchange Commission. King does not undertake to publicly update or revise any of its forward-looking statements even if experience or future changes show that the indicated results or events will not be realized. -0-
KING PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30, December 31,
2008 2007
----------- ------------
ASSETS
Current assets:
Cash and cash equivalents $1,095,549 $ 20,009
Investments in debt securities 97,952 1,344,980
Marketable securities 1,078 1,135
Accounts receivable, net 169,040 183,664
Inventories 104,899 110,308
Deferred income tax assets 94,171 100,138
Income tax receivable - 20,175
Prepaid expenses and other current assets 39,216 39,245
----------- ------------
Total current assets 1,601,905 1,819,654
----------- ------------
Property, plant and equipment, net 264,439 257,093
Intangible assets, net 674,521 780,974
Goodwill 129,150 129,150
Deferred income tax assets 364,700 343,700
Investments in debt securities 334,082 -
Other assets 88,657 96,251
----------- ------------
Total assets $3,457,454 $3,426,822
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 65,197 $ 76,481
Accrued expenses 278,564 376,604
Income taxes payable 17,149 -
----------- ------------
Total current liabilities 360,910 453,085
----------- ------------
Long-term debt 400,000 400,000
Other liabilities 61,947 62,980
----------- ------------
Total liabilities 822,857 916,065
----------- ------------
Commitments and contingencies
Shareholders' equity:
Common shares no par value, 600,000,000
shares authorized, 246,481,982 and
245,937,709 shares issued and
outstanding, respectively 1,297,974 1,283,440
Retained earnings 1,356,014 1,225,360
Accumulated other comprehensive (loss)
income (19,391) 1,957
----------- ------------
Total shareholders' equity 2,634,597 2,510,757
----------- ------------
Total liabilities and shareholders'
equity $3,457,454 $3,426,822
=========== ============
-0-
KING PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ---------------------
2008 2007 2008 2007
--------- --------- --------- -----------
REVENUES:
Total revenues $396,851 $542,726 $828,884 $1,058,756
--------- --------- --------- -----------
OPERATING COSTS AND
EXPENSES:
Cost of revenues,
exclusive of
depreciation,
amortization and
impairments shown below 99,556 121,685 191,017 233,139
Excess purchase commitment 2,629 - 2,629 -
Contract termination - 3,845 - 3,845
--------- --------- --------- -----------
Total cost of revenues 102,185 125,530 193,646 236,984
--------- --------- --------- -----------
Selling, general and
administrative, exclusive
of co-promotion fees 102,735 127,316 211,776 248,526
Special legal and
professional fees (825) (1,632) 2,035 (488)
Co-promotion fees 10,063 47,524 28,020 93,482
--------- --------- --------- -----------
Total selling, general,
and administrative
expense 111,973 173,208 241,831 341,520
--------- --------- --------- -----------
Depreciation and
amortization 31,154 38,912 90,229 73,090
Accelerated depreciation 651 1,500 1,274 3,000
Research and development 48,662 37,355 77,170 69,626
Research and development-
In-process upon
acquisition 5,500 3,100 5,500 3,100
Asset impairments 39,429 74,810 39,429 74,810
Restructuring charges (542) - 517 460
--------- --------- --------- -----------
Total operating costs
and expenses 339,012 454,415 649,596 802,590
--------- --------- --------- -----------
OPERATING INCOME 57,839 88,311 179,288 256,166
OTHER INCOME (EXPENSE):
Interest expense (1,838) (1,853) (3,642) (3,878)
Interest income 9,261 8,517 22,890 17,783
Other, net (123) 278 (827) (265)
--------- --------- --------- -----------
Total other income 7,300 6,942 18,421 13,640
--------- --------- --------- -----------
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME
TAXES 65,139 95,253 197,709 269,806
Income tax expense 22,118 30,394 67,055 88,893
--------- --------- --------- -----------
INCOME FROM CONTINUING
OPERATIONS 43,021 64,859 130,654 180,913
--------- --------- --------- -----------
DISCONTINUED OPERATIONS
Loss from discontinued
operations - (115) - (335)
Income tax benefit - (41) - (120)
--------- --------- --------- -----------
Total loss from
discontinued operations - (74) - (215)
--------- --------- --------- -----------
NET INCOME $ 43,021 $ 64,785 $130,654 $ 180,698
========= ========= ========= ===========
Basic net income per common
share $ 0.18 $ 0.27 $ 0.54 $ 0.74
========= ========= ========= ===========
Diluted net income per
common share $ 0.18 $ 0.26 $ 0.53 $ 0.74
========= ========= ========= ===========
Shares used in basic net
income per share 243,440 242,746 243,365 242,568
Shares used in diluted net
income per share 245,029 244,550 244,859 244,110
-0-
KING PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
EXCLUDING SPECIAL ITEMS - NON GAAP
(in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ---------------------
2008 2007 2008 2007
--------- --------- --------- -----------
REVENUES:
Total revenues $396,851 $542,726 $828,884 $1,058,756
--------- --------- --------- -----------
OPERATING COSTS AND
EXPENSES:
Cost of revenues,
exclusive of depreciation
and amortization shown
below 99,556 121,685 191,017 233,139
--------- --------- --------- -----------
Selling, general and
administrative, exclusive
of co-promotion fees 102,735 127,316 211,776 248,526
Co-promotion fees 10,063 47,524 28,020 93,482
--------- --------- --------- -----------
Total selling, general,
and administrative
expense 112,798 174,840 239,796 342,008
--------- --------- --------- -----------
Depreciation and
amortization 31,154 38,912 90,229 73,090
Research and development 48,662 37,355 77,170 69,626
--------- --------- --------- -----------
Total operating costs
and expenses 292,170 372,792 598,212 717,863
--------- --------- --------- -----------
OPERATING INCOME 104,681 169,934 230,672 340,893
OTHER INCOME (EXPENSE):
Interest expense (1,838) (1,853) (3,642) (3,878)
Interest income 9,261 8,517 22,890 17,783
Other, net (123) 278 (827) (265)
--------- --------- --------- -----------
Total other income 7,300 6,942 18,421 13,640
--------- --------- --------- -----------
INCOME BEFORE INCOME TAXES 111,981 176,876 249,093 354,533
Income tax expense 38,593 59,390 85,237 119,049
--------- --------- --------- -----------
NET INCOME $ 73,388 $117,486 $163,856 $ 235,484
========= ========= ========= ===========
Basic net income per common
share $ 0.30 $ 0.48 $ 0.67 $ 0.97
========= ========= ========= ===========
Diluted net income per
common share $ 0.30 $ 0.48 $ 0.67 $ 0.96
========= ========= ========= ===========
Shares used in basic net
income per share 243,440 242,746 243,365 242,568
Shares used in diluted net
income per share 245,029 244,550 244,859 244,110
-0-
KING PHARMACEUTICALS, INC.
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except per share data)
(Unaudited)
The following tables reconcile
Non-GAAP measures to amounts
reported under GAAP:
Three Months Ended Six Months Ended
June 30, 2008 June 30, 2008
------------------ -----------------
EPS EPS
------- -------
Net income, excluding special
items $ 73,388 $163,856
Diluted income per common share,
excluding special items $ 0.30 $ 0.67
SPECIAL ITEMS:
Excess purchase commitment
(cost of revenues) (2,629) (0.01) (2,629) (0.01)
Special legal and professional
fees (selling, general, and
administrative) 825 0.00 (2,035) (0.01)
Accelerated depreciation (other
operating costs and expenses) (651) (0.00) (1,274) (0.01)
Research and development-In-
process upon acquisition
(other operating costs and
expenses) (5,500) (0.02) (5,500) (0.02)
Asset impairments (other
operating costs and expenses) (39,429) (0.16) (39,429) (0.16)
Restructuring charges (other
operating costs and expenses) 542 0.00 (517) (0.00)
--------- ------- --------- -------
Total special items before income
taxes (46,842) (0.19) (51,384) (0.21)
Income tax benefit from special
items 16,475 0.07 18,182 0.07
--------- ---------
Net income $ 43,021 $130,654
========= ------- ========= -------
Diluted income per common share,
as reported under GAAP $ 0.18 $ 0.53
======= =======
Three Months Ended Six Months Ended
June 30, 2007 June 30, 2007
------------------ -----------------
EPS EPS
------- -------
Net income, excluding special
items $117,486 $235,484
Diluted income per common share,
excluding special items $ 0.48 $ 0.96
SPECIAL ITEMS:
Contract termination (cost of
revenues) (3,845) (0.02) (3,845) (0.02)
Special legal and professional
fees (selling, general, and
administrative) 1,632 0.01 488 0.00
Accelerated depreciation (other
operating costs and expenses) (1,500) (0.01) (3,000) (0.01)
Research and development-In-
process upon acquisition
(other operating costs and
expenses) (3,100) (0.01) (3,100) (0.01)
Asset impairments (other
operating costs and expenses) (74,810) (0.31) (74,810) (0.31)
Restructuring charges (other
operating costs and expenses) - - (460) (0.00)
Loss from discontinued
operations (115) (0.00) (335) (0.00)
--------- ------- --------- -------
Total special items before income
taxes (81,738) (0.34) (85,062) (0.35)
Income tax benefit from special
items 29,037 0.12 30,276 0.13
--------- ---------
Net income $ 64,785 $180,698
========= ------- ========= -------
Diluted income per common share,
as reported under GAAP $ 0.26 $ 0.74
======= =======
KING PHARMACEUTICALS, INC.
SUMMARY RECONCILIATION OF SPECIAL ITEMS
FOR THE SECOND QUARTERS ENDED JUNE 30, 2008 AND 2007
King recorded special items during the second quarter ended June 30, 2008 resulting in a net charge of $47 million, or $30 million net of tax, primarily due to an intangible asset impairment charge related to Synercid(R) I.V. Injection.
During the second quarter ended June 30, 2007, King recorded special items resulting in a net charge of $82 million, or $53 million net of tax, primarily due to (i) an impairment charge totaling $46 million related to the Company's classification of its Rochester, Michigan sterile manufacturing facility and certain legacy branded products as held for sale and (ii) an impairment charge totaling $29 million related to Intal(R) and Tilade(R) as a result of the Company's decision to no longer pursue the development of a new formulation of Intal(R) utilizing hyrdrofluoroalkane (HFA) as a propellant.
KING PHARMACEUTICALS, INC.
SUMMARY RECONCILIATION OF SPECIAL ITEMS
FOR THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
King recorded special items during the six months ended June 30, 2008 resulting in a net charge of $51 million, or $33 million net of tax, primarily due to an intangible asset impairment charge related to Synercid(R) I.V. Injection.
King recorded special items during the six months ended June 30, 2007 resulting in a net charge of $85 million, or $55 million net of tax, primarily due to (i) an impairment charge totaling $46 million related to the Company's classification of its Rochester, Michigan sterile manufacturing facility and certain legacy branded products as held for sale and (ii) an impairment charge totaling $29 million related to Intal(R) and Tilade(R) as a result of the Company's decision to no longer pursue the development of a new formulation of Intal(R) utilizing HFA as a propellant.
EXECUTIVE OFFICES
KING PHARMACEUTICALS, INC.
501 FIFTH STREET, BRISTOL, TENNESSEE 37620
Contact
King Pharmaceuticals, Inc.
James E. Green, 423-989-8125
Executive Vice President, Corporate Affairs
or
David E. Robinson, 423-989-7045
Senior Director, Corporate Affairs
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